Traders are making a fortune betting against gun stocks

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Getty Images / Joe Raedle

  • Traders have made more than $41 million over the past week betting against the stocks of gun makers, according to S3 Partners data.
  • The sector has come under pressure as major retailers like Dick’s Sporting Goods have started placing limitations on the purchase of ammunition and certain guns.

Gun makers have been taking it on the chin lately, and traders betting on their stock prices to fall are laughing all the way to the bank.

Short sellers – or traders wagering on a share decline – made $41 million over the week ended Thursday, according to data compiled by the financial-analytics firm S3 Partners. And that number is likely much higher on Friday as shares of American Outdoor Brands (AOBC) – one of the largest firearm producers in the US – dropped as much as 12% following disappointing earnings.

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S3 Partners

Even before this most recent decline in AOBC, short sellers had raked in $112 million on a year-to-date basis. They’ve capitalized on selling pressure in the sector following multiple mass shootings, as major retailers like Dick’s Sporting Goods have started placing limitations on the purchase of ammunition and certain guns.

Still, S3 speculates short sellers “may decrease their near-term exposure” in case increased regulations spur so-called “panic buying” that has historically increased sales following major incidents.

Either way, they’ve been well-positioned for this most recent patch of weakness.